Enterprise Software in China

WSJ reports that SAP and Oracle are taking big steps to sell to the mid-sized enterprises in China, “moving into direct competition with local developers that offer business software at lower prices.”

The two giant companies have modified their complex suites of business applications to make them less expensive and easier to implement in the Chinese market. To save costs, both are signing up distributors to sell the products rather than relying on their own sales forces.

Their actions come as two of China’s largest software companies, Kingdee International Software Group and UFSoft Co., have started to sell more-sophisticated enterprise-management programs, moving up from their base in accounting products.

But the moves also reflect the fact that China’s demand for basic business software is larger than for broader, multifunction suites. Chinese businesses purchased $142 million of accounting software last year, compared with $85.5 million of more complex, enterprise-wide products, according to International Data Corp., a market-research firm.

“Brand recognition, price and delivery capability will combine to determine whether their execution will be good enough to compete with the local vendors,” said Louisa Liu, a software-market analyst in Shanghai for Gartner Inc., a market research and consulting firm.

SAP is starting its software at prices under USD 10,000. I think India is already beginning to see these price reductions also – only that the local companies aren’t as well established as their counterparts in China.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.